The Pentagon’s $435 hammer

By Ezra KleinBy Ezra KleinJune 8, 2011

“Sure, there were invoices that showed the Pentagon shelling out $435 apiece for hammers, but the documents were more of a testament to the government’s odd accounting practices than its wastefulness. Per Pentagon accounting rules, defense contractors were expected to spread their overhead costs evenly across products to simplify bookkeeping. As a result, massive expenses for things such as research and development and factory maintenance were averaged into the cost of everyday office supplies. That meant while super-expensive items such as missiles came in cheaper on the register, the price of small-ticket items such as hammers were distorted in the other direction. And, because ‘Pentagon Gets Real Bargain on Missile!’ makes a lousy headline, the media latched onto the $435 hammer story. Since then, the Pentagon has changed its accounting rules, but it’s still trying to live down the urban legend about the costly tools lurking in its overpriced toolbox.”